Calexis

There is a scary pit in marketing.  It is deep and dark and hard to get out of.  It is the lures for retailers of sales from pricing features.

If sales start slipping, the easiest, knee jerk reaction is to feature a lower price item and use it to lure in some business.  It does work in the short term.  But sooner than later, what it does is start to train your customers into watching price and look for the features.

Most retailers do this in a limited way.  It is okay to do, if they are selling someone else’s product.  In those cases, the retailer is providing added value through distribution and that’s about it.  Newer, faster, more convenient distribution, like Amazon provides, can negate that distribution value.

Given that the featured, branded product is the same, the purchase decision comes down to price point and convenience.

Just ask the gasoline retailers.  They know about the power of a tenth of a cent per unit!  People cross the street, make U-turns; all to save a small amount of money.  That’s why pricing is hugely featured on every station’s street front signage.

But let’s talk retailers whose product is their own.

In the restaurant business, fast feeders have the opportunity to price their products however they wish because for the most part they are not totally comparable with competitors.  True many are similar, but each store has its own recipe.  There are only four reasons why someone would buy your food – sensory delivery, nutrition, price and convenience.  Also, consider the elasticity of your business: you have to sell a whole lot more product at a lower price to equal your profitability at a higher price.

However, we have seen downswings, maybe due to weather, maybe a competitor enters a market, and the panic sets in to do deep cut couponing or lower price advertising features.

If you have confidence in your product, you must resist lowering the price.

If not, you spiral into the pit of cheap food and it is extraordinarily difficult to claw your way out.  It took McDonalds several years to manage their way out of cheap food.  Subway is still trying to do it after many years.

After the price has been lowered, current customers may wonder if they were being ripped off before, or if the product has been “cheapened” to afford the lower price.  It is tough because there is no easy way out of the pit. It is hard to have the pendulum swing back to where your customers feel they are paying the right amount for the food they are buying.

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